Strategies to Take the Stress Out of Your Retirement

5.26.23: Audio automatically transcribed by Sonix

5.26.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to Retire 360 with your host, Dwight Mejan. Dwight is a licensed fiduciary and financial advisor who always places your needs first. Dwight works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Dwight Mejan.

Dwight Mejan:
Wow. Has it been a week already? It just seems like I was sitting in this chair recording last week. My name is Dwight Mejan. Welcome to this week's Retirement radio broadcast. My name is Dwight and I'm your host. And alongside me this week who was not here last week, Mitchell Keiser and our executive producer Sam Davis, filled in for him last week, enjoyed having him part of the show and certainly enjoy having all of you a part of the show. So welcome back. If you are returning and if you're a first time listener, we just want to welcome you. We are broadcasting today, this week from our Southern Pines location, but we also have listeners out in the western part of the state in the Boone Banner, elk blowing, blowing rock triad, as we like to say, that's our mountain triad. But we're glad that you're with us. This is brought to you by the Retire 360 show, but it's actually 360 Capital Management. That is us. Mitchell, how's your week been? You had a little time. What were you doing last week? Oh, you were driving last week when we did this show, weren't you?

Mitchell Keiser:
Hey, folks. Yeah. Sorry I missed you last week. I was actually heading back from Boone. We taught a class in the library down there, the Watauga County Library. So I was headed back to the low country here in Southern Pines. But anyhow, I'm glad to be back. It is much hotter down here. So everybody up in high country, you can appreciate the 20 degree difference. It's pretty nice.

Dwight Mejan:
Yeah. Awesome. Well, it's good to have you back, Mitchell. I know we got a great show planned for our listeners today. We're going to jump right into that here in just a moment. But for those of you who are new, we have a podcast. You can get caught up on that Anywhere you download podcasts or listen to them, you can just type in the search bar, Retire 360, bring you up to date with some of the past episodes here, a little bit of kind of where we're coming from. And also you can go to a YouTube channel if you like YouTube there you would just type in Retire 360 show and you could find our YouTube channel there as well. But don't hesitate to reach out to us if you're a listener. We'll get you numbers here. Actually, I'll give those to you. Now, if you're in the western part of the state, (828) 278-7814 is our number there. And down in the low country Southern Pines area, we are at (910) 235-0812. Glad to have you with us. We are actually loving for you to reach out to us. We have a report that we'd love to put in your hands. It's actually on bond replacement strategies. You know, we talk a fair amount with the way the market went last year, kind of a big dip. You know, Bonds took a beating last year and we'd love to get a free report in your hands as far as some alternative investments for the bond portion of your portfolio. And this would also help you reduce some of the fees that you're paying if you have a 60 over 40 bond portfolio.

Dwight Mejan:
Some of the alternative investments that we use with clients and discuss with clients that come into our office, this would help get some of that money away from the fee side of what you're paying, which is really ultimately more money in your pocket and, you know, alternatives. Mitchell is really what helped stabilize a lot of the drops that people saw in portfolios last year that were heavy in the bond side. And we love to talk about alternative investments. They're growing in popularity, and we would love to put that report in your hands. So just reach out to us at one of those numbers I just gave. We'll give it to you more throughout the show. But thanks for being with us, taking part of your day. And we're going to talk today. We're going to have our quote of the week, which Mitchell will get to here in just a moment. He's going to share some update with you on the Memorial Day weekend. Just some travel information and some gas prices. We're going to do a little part on our show we call right or Wrong, which is just dispelling some myths. And we're going to put some of your knowledge to the test and then we're going to talk about withdrawing money early from your retirement savings and some of the tax consequences to consider if you were thinking about doing that. And then also we're going to talk about some financial moves to reduce stress and anxiety when it comes to your money. So, Mitchell, I'm going to let you just kind of dive in here and start with the quote of the week.

Producer:
And now wholesome financial wisdom. It's time for the Quote of the Week.

Mitchell Keiser:
Yeah. So our quote of the week this week is brought to us by Joe Moore. And that is a simple fact that is hard to learn is the time to save money is when you have some, which is pretty true sometimes. I think I'll just take this to a personal level. When you, you know, your savings starts to be higher than it was before or when, you know you have money in your pocket, it's easy to burn it. It's easy to go buy that thing that you were thinking that you wanted. But the fact of the matter is you do need to save for a rainy day. You do need to save for your retirement. So the best time to prepare for that is, yeah, it's when you got it. Learning that financial discipline is can be pretty tasking. I just wanted to tell you guys this real quick before we hop into some material here. Now, this is going to be applicable to our Sandhills listeners only. We are going to have a class this upcoming June the 13th, which is a Tuesday at 11:00 at Sandhills Community College. If that is something that is of interest to you, we are going to be doing taxes in retirement. If you guys want to learn more about taxes, how to take advantage of taxes in retirement, come check us out. The best way to sign up for that is to just give us a call. We can just get some information from you and make sure you have a seat and the number to call for that would be (910) 235-0812. Again, if you want to come to our class on June 13th at 11 a.m., give us a call at (910) 235-0812. Hey, Mitchell.

Dwight Mejan:
On that note, I just wanted to kind of say something to our listeners on that. It came to mind when you were given that update. It is a great class and we had actually a listener of the radio show. It's been a long time listener come to that class last time we did it at Sandhills and they came in looking at an option for a pension that they had with the company that they work with. I know the pensions are kind of dying for a lot of retirees, but there are folks certainly that listen to this radio show and probably listening right now that have pension options available to them. And this particular individual was looking at a pension option. And we ran a quote on that lump sum pension for them. And we were able to beat the pension payout by about 10%. Pretty close to that was about a little over 9% to be exact of what they were going to receive. More importantly, and I want the listeners to understand this is when you take a pension option from an employer, as soon as you elect that pension option, it's fixed and the lump sum of money that you would have gotten had you chose the lump sum, it's gone. It's no longer can you get it once that first payment is processed. At that point, let's say, for example, you do a joint survivor payout where either spouse is living.

Dwight Mejan:
They're going to receive the same payment that with the pension option that they would have elected. That would have been the case. So if they both, for whatever reason, got their wings and flew out of here early, both of them, that pension payment would stop and it would not continue to a beneficiary. So not only did we beat the pension payment and this doesn't always happen, it depends on really the numbers that we have to run and we shop it around at some other other places. But that lump sum of money, if there is a lump sum under the pension option that we're using and it was a joint life, so we matched it apples to apples comparison. They had a lump sum that was tracking a death benefit. So if they did prematurely pass away, that lump sum of money was going to transfer to the next generation to another set of beneficiaries, which would not have been the case to the pension. So just to plug there and that was just somebody who didn't didn't really know there was another opportunity out there and we don't know until we run it. But that's just a great plug to understand what's available to you from an educational standpoint. That's some of the things that we talk about at our events. So just wanted to put that in there. Mitchell But yeah, hope to see you, our listeners there. Yep.

Mitchell Keiser:
Good stuff. Next here, we're going to talk about since it's Memorial Day weekend, we're going to talk about some Memorial Day weekend statistics, specifically inflation. And we're going to start with gas prices. I do find it interesting when talking about some transportation costs, how much higher they are this year. I want you guys to first just remember that about two weeks ago, on May 11th, the CDC declared the public health emergency of Covid over. So I think given that a lot of people are eager to get out, they're eager to travel, go see that family they haven't seen. It's summer now. People are they're getting antsy. So the average gas price. Dwight, do you have any idea what it is? What's the average gas price across America?

Dwight Mejan:
I've got to say, I know we're probably in a lower state, probably in the, what, 330 range a gallon.

Mitchell Keiser:
So the average gas price is 354 and that's across the whole United States. So the top five states in this article is according to Triple A is number one, California at 480 a gallon, to Hawaii at 475. Three, you have Arizona at 462. Number four, we have Washington at 461. And number five, we have Nevada at 424 per gallon. So, hey, for.

Dwight Mejan:
Those of you listening, I did see Mitchell, the cheapest place I've seen it here in North Carolina for our listeners. And it's kind of between some of where we broadcast. But North Wilkesboro, North Carolina, I actually saw it last week where I stopped at a Murphy station there. It was 297 a gallon. So.

Mitchell Keiser:
Oh, yeah, yeah. Some of.

Dwight Mejan:
The cheaper rates.

Mitchell Keiser:
Got to fill up where you can. But yeah, and just some reminders for you guys. Expect travel delays this Memorial Day. Just keep that in mind as you're making your plans. So some other interesting statistics, though, surrounding the holiday is that despite the recent increases at the pump, the gas prices are actually still lower than they were this time last year. About 37.1 million Americans will drive to their destination this year. That's according to Triple A. Additionally, trains and buses for the upcoming holiday weekend is expected to increase by 20.6%. So over 20% of people are now going to be taking trains and buses. And if I had to go out on a whim here and guess why is that? Probably because the cost of everything has just gone up so much this year that people are looking for ways to cut costs, which is a great idea. I would do that if we could. Yeah. Another stat here for you guys, Triple A found that the forecast comes that Airbnb is reporting to have a record high bookings for 2023 for this weekend. And according to a survey in February by the US Travel Association, about 23% of Americans are planning to travel for leisure in 2023, which I think is pretty, pretty interesting. So air travel with that is expected to go up by 11% from last year. And Memorial Day weekend could be the busiest the airports have seen since 2005. Again, factor this all in to your plan. So the airports could be as busy as they've been in over a decade. So if you guys are you and your family are on the road this weekend, travel safely and consider leaving early or if you guys have already left or you're at your destination, you might just want to take that into consideration when heading out. Yeah.

Dwight Mejan:
Absolutely. And I think I'd be remiss, Mitchell, if we didn't take a moment just to celebrate those that are in the service, people who have retired from the military. Just thank you to all of our veterans and their families. You know, as we prepare to enjoy Memorial Day, we just want to take time to reflect on those that made the ultimate sacrifice for this country that we live in. Many brave men and women of our armed forces and their families and those that ultimately lost their life in the line of duty to give us the freedoms that we have. So just thank you from the bottom of our heart here at 360 Capital Management to all of you and on behalf of all of our listeners, thank you for your service to our country. So we're going to take a quick break here. And when we come back, we're going to put your financial knowledge to the test and do our segment here of right or Wrong. So we'll be right back.

Producer:
Like what you're hearing, you can watch the show to visit YouTube.com and search Retire 360 to watch clips from this program.

Producer:
Cord cutting back on cable television. Lower your monthly expenses. I'm Jim Tarabukin with the retirement Radio Network Powered by Emperor Life, an April 2023 survey done by CNBC shows 70% of Americans are feeling financially anxious. Cnbc's senior personal finance correspondent Sharon Epperson explains.

Sharon Epperson:
A vast majority of respondents, 70%, say they are stressed about their personal finances, and that includes 57% of people earning $100,000 or more. 58% say they're living paycheck to paycheck.

Producer:
And while a large majority of Americans are looking for ways to cut back on their expenses, doing away with high cable bills could provide some additional relief. Generation Z and millennials know all about that, having ushered in the streaming era. But with streaming services expanding their menu of options, thus pushing up their monthly prices, streaming may actually do more financial harm than good. In fact, in January of last year, streaming giant Netflix added a $1.50 to their monthly rate, while Hulu is now charging $14.99 a month for their ad free streaming platform up from the previous 12.99 price point. With streaming becoming inevitably more expensive, is it possible to keep traditional cable while lowering the monthly bill? Some cable companies now offer a channel a la carte option. Maybe try cutting back on premium channels, pare down cable boxes, or downsize your plan to eliminate channels you don't watch and save 15 to $25 a month. Cutting back on cable television, part of our 23 cost cutters for 2023 for the Retirement.Radio Network Powered by AmeriLife. I'm Jim Terebovlia to get your free copy of 23 cost cutters for 2023 call Dwight today at (910) 235-0812 or visit Retired360Show.com.

Producer:
At 360 Capital Management. We know you've worked hard to earn your money and you've worked even harder to save it. When it comes to wealth management and planning for retirement, Dwight Migeon is passionate about helping people protect and grow their wealth. Visit Retire360show.com to schedule your free consultation today. It's a $1,500 value provided at no cost to you. Book yours now at Retire360show.com . You're listening to Retire 360 with Dwight Mejan. Now back to the show.

Dwight Mejan:
All right. Hey, we're back. My name is Dwight Mejan and I'm your host alongside me, Mitchell Keiser. We're talking here today's show, Protecting and Growing money for a happy retirement and how we take the stress out of retirement planning. So we're going to jump into a segment here we call Right or Wrong. Just want to put some questions out there to you, the audience, and test your financial knowledge. But before we do that, I just want to talk I don't normally do this in this show, but I want to talk just a little bit about something that has kind of come up a fair amount this past week. So it's just kind of current. It's information that in the course of my week I spend a lot of time in meetings with clients, with prospective people who come through the door and want a second opinion. But just something that I just want to bring to the forefront here that I think is relevant to certainly this show is the income plan that you have for your own retirement. And when we talk about an income plan, you know, it's one thing and it's important. Part of retirement planning is obviously to save for retirement. It's a given. You know, you put money in your retirement plan for most of us, you know, for working for a company. It's the 401 K plan or the 403, B, the 457. That's where the majority of the retirement savings is going. It's going from coming from the retirement plan from the employer as it should. They're hopefully doing some level of match for that. But what a lot of people don't have clarity on this is something that is really it doesn't startle me, but I was taken back by it a lot this week is I was posing a very specific question to people who came in my office is I basically said to them, you know, Joe, Mary, whoever was in front of me, there was a point when I would ask them about their income.

Dwight Mejan:
Walk me through the plan that you have to take the income and the target income. I've already we've already had a discussion about what the target range is for their income. How do you plan to harvest that out of the portfolio that you have? And and guess what surprised me more than anything is I didn't get clarity from one person that I went over that with. It was very vague. It was very general. It was, Well, I'm just going to take this percentage out of my portfolio. And I said, How are you going to do that? Is it going to come from a cash part of the portfolio? Are you going to redeem some of the shares of what you own throughout the whole investment strategy? How are you going to do that? And no one, at least this week could tell me that. And I've had places in the past where I've asked that question. So it just kind of stood out to me. And I didn't really even talk to Mitchell about this before the show that I was going to talk about this. But folks, it's really, really important that you understand in your own words and in your own mind so you can explain that to somebody.

Dwight Mejan:
This is how I plan to take income out, because then once you can define that and put some terms around it, then it's important you understand if there's any tax implications of how you're planning to do that. Okay. And it's really important we talk about Ross. We're not talking about him today, but to have a bucket of money that's set aside as tax free money that you could take out down the road, especially if tax structure changes, which it likely will. We're going to talk about that a little bit in this next segment as far as programs like Medicare and so forth and Social Security, but very important that you understand how you're going to get that income and more importantly, your pre-retirement wages. You know, if you make a $100,000 a year, you're going to need about 80,000 of income in retirement just to support and maintain that same lifestyle. That's just an average number. You take about 80% of that pre-retirement income and that's what you're going to need when you retire. And for most people, Social Security is going to represent 40% of that need. So the question becomes, where's the other 60% of that figure going to come from? And what we do here at Retire 360 show and specifically 360 Capital Management, our company, we want to show you how we can get your income if it's possible, to somewhere between 60 to 65% of the total need of that 80% of your pre-retirement. So if you needed 80,000 to retire on, we want to show you a way that we can guarantee, which would include the Social Security payment, around 65% of that 80% number.

Dwight Mejan:
We want to show you how to get that guaranteed in retirement, not hypothetical, because you're going to be dependent on the market. If it's just Social Security and you're investing money purely in the market, there's got to be some strategic fixed, principal protected money. And that's one of the things that we'll walk you through. So I would just encourage you, if you're in that category and you're relating to what I'm saying here, and you're like, Dwight, I have no idea besides Social Security, how I'm going to get that income. And I couldn't begin to explain to you where it's going to come from. Then you're listening at the right. Time for the right reasons. Pick up the phone and give us a call. So if you're in the western part of the state, dial (828) 278-7814. Again, that's (828) 278-7814. If you're down in the Southern Pines area, it's (910) 235-0812. Again it's (910) 235-0812. And look forward to just having that complimentary meeting with you, asking you some questions and and letting you see what we can do and what we'd recommend for you. It cost you nothing. It could be a great investment of your time. We believe it would because it's either going to confirm the direction that you're thinking or it's going to give you some new things to think about. And I think we're pretty good at giving folks new things to think about when it comes to their retirement and their portfolio. So that being said, let's jump into the right or wrong here.

Producer:
Come on down as we test your financial knowledge. In right or wrong.

Dwight Mejan:
The Social Security Administration has come out and stated that if no changes are made, the Social Security trust funds will be depleted by 2034. Is that right or is that a wrong statement? Well, if you said it was right, you are correct. What people have speculated for decades appears to be coming in about ten years. Social Security has a funding problem and it's in need of some serious changes in order to continue paying those benefits for both current and future retirees. Remember, the tax base is shrinking when Social Security started. Was it Mitchell? Was it 30 to 1 or 40 to 1? Sam might even know that, too. These are 30 or 40 to one people working. We're heading to a point here because of the influx of baby boomers coming into retirement where we're like three or 4 to 1 working. And those benefits are just very, very difficult to to support and to sustain that. I think Sam's throwing some statistics up there right now. 1940, 35,390 people that were, what is that, a covered workers and they were beneficiaries. There were 222. So there was a huge ratio and it's dropping to 3.2 to 1 is where we're headed. So lots of big changes coming. You know, in the area of Social Security, we believe that there'll be means testing. And that's why it's also important to come up with a strategy, folks, for your income is what's going to be the best way to take income.

Dwight Mejan:
You know, should we delay Social Security? We met with somebody this past week who was planning on taking Social Security at full retirement age. And in a 30 minute session with them, they saw very, very clearly, based on their assets and their portfolio, they needed to push it to age 70, laid it out for them on the tax map. We put it out there for them and we showed them some other strategies that they could use to to minimize the taxes. So you got to get those opinions and you got to plan ahead. So we'd love the opportunity to go over that with you. But, you know, this is why we stress the importance of having a strong income plan and not counting on Social Security as the main component of your retirement income. And again, our goal here at 360 capital is we want to show everyone a way, if it's possible in their situation, to get between 60 and 65% of their total income need in retirement. Built on a guaranteed platform so that whether markets are up or whether they're down, we want to have that income to be income you can count on no matter what. So that's one of the things that we'll do. But Mitchell, why don't you go to the next one here and we'll test our listeners on the next topic? Yeah.

Mitchell Keiser:
So another another test question for you guys. If your employer doesn't offer a pension or any other kind of defined benefit plan, is there any other way to establish a personal lifelong income stream? Do you think you can do that or not? Well, if you thought that you could not do that, you are wrong. You can in fact create a permanent income stream for yourself. I think that's a common misbelief that most people have. And I can say for myself, I grew up in a household where everybody worked for the government or the school system or some form of company that had a pension. And the reasoning behind it was and I kind of grew up hearing that that is how you were going to retire and that's what you had to live off of for retirement or you had to figure it out on your own. Which a part of that is true. But just because you have to do something on your own or invest in a 401. K or an IRA, or if you're self-employed and you do it all on your own. That's not to say that that's worse. You just have to know what you're doing. In many cases, as Dwight mentioned earlier, it could be better. We have the client that we had come in this past week. They had a huge lump sum opportunity to do a pension with their current employer and don't know if he mentioned the name.

Mitchell Keiser:
I'm not going to mention the name, but if we did, everybody would know who it is. It's a huge employer, but there are private pensions out there that you can purchase that would outperform a lot of mainstream pensions that these big corporations or even some government entities could have. And that is in the form if you guys don't know, a pension is a form of an annuity. So you have to go into the private sector and purchase a annuity that can act as a pension. And that is something that we could help somebody do here. As he mentioned, we're in the process of helping somebody do that right now. So these annuities and the way that that would work is you create a pension as a normal pension would be. But if something happens to you, let's just say, you know, day one of receiving your pension and you pass away, that lump sum can still pass to a beneficiary. More often than not, if you do elect a pension with an employer or with the government, and once you trigger that income, the lump sum is gone. You don't get it back. So if you pass away shortly after that, it doesn't matter. The money's gone. And I have actually a very a pretty personal example of that. So I grew up in the Northeast and our neighbors were both wardens of prisons.

Mitchell Keiser:
And the gentleman that I won't say his name, but he was a warden of a prison for, gosh, a bulk of his career, far past what he would have received a full pension in. And it was a state prison as well. And so, yeah, he had a pretty high pension and he retired and he took up another warden job to boost that pension even higher. So then once he finally hit retirement age, he got put on kidney dialysis and he lived for another month and he died. And he didn't leave his family a dime. They didn't get any of his retirement, any of his pension. His wife was left to her income, which was nothing near what his was. His kids had no no legacy as far as what his his personal earnings were. It was all just it was toast. So that is something to I guess just also consider in the plans, having an option where a beneficiary would be able to get the lump sum most most federal, state or private pensions. If you work with an employer, don't offer that. But these index, you can index the gain within your within your pension to have like a phantom number where if you do pass away, this is what your beneficiaries would get and you can link that to different indexes. So if you thought if you were passionate about the S&P, you could tie your gain to the S&P or if you were, you felt strongly about fixed interest rates.

Mitchell Keiser:
There are some pretty high fixed interest rates that you could tie that to as well. Some of these types of annuities also offer bonuses. So I know just for example, one of the bonuses going into that pension stream is 20%. So if you gave, you know, $1 million to this pension or $100,000, they'd give you 20% more on that number and then you'd get a percentage of that for the rest of your life. It's a lot of information. It's pretty complex. Some of it can even be a little scary. And that's not meant to scare you, but it is meant to just make you aware. And if you guys are kind of contemplating if your employer has the best pension option for you or if you work for the state or whatever that would be. If you want a second opinion just to say, Hey, Mitchell and Dwight, well, how much could my pension be if I rolled it to a private company versus a public one? We could definitely give you that and we wouldn't charge you. If that is something you're interested in, be happy to help out with that. Just give us a call. Our office number (910) 235-0812. If you're in high country, give us a call there. We'll still be able to help you out if you have questions on that.

Dwight Mejan:
Awesome. Thanks for that, Mitchell. Another one here is once you turn 65 years old, Medicare will cover all of your health care costs, including any long term care needs. Well, hopefully you said wrong to that one. And the obvious reason was Medicare will not cover all of your health care costs. They will not cover but a small amount of long term care. Many people believe that the government is going to take care of them and their medical expenses once they get to Medicare. Unfortunately, that's not the case. You got to be prepared for any and all the costs during retirement. And there's just some of them monthly Medicare premiums. Mitchell should be covering this one because he handles that a lot in our office. But roughly $165 a month, that can be different based on your income. You've got other costs for annual deductibles. You've got co-payments, you've got prescription drug costs, which we know are huge for a lot of our listeners, as well as a lot of our clients. Service is not covered by Medicare such as vision and dental care. And then of course, the big one is, of course, long term care. And this is the single largest asset that I believe from witnessed this for three decades with people that can wipe you out financially, literally wipe you out. And we believe that, you know, the best offense is a strong defense. And that's really where looking at long term care and evaluating whether that's a good option or not. You know, some people we've talked to about this, Mitchell, that have come into our office and said, hey, I looked at this, but, you know, I didn't qualify or I applied for something and wasn't able to get it.

Dwight Mejan:
Well, time is sometimes the best healer in these situations, so to speak, where people maybe you had a condition that wasn't a flat out no forever. It was just based on some things that were going on at the time. So we would encourage you if you want to get an update on, you know, whether or not long term care makes sense again for you. You know, reach out to us and we'll we'll let you know if you're a candidate to consider that. And there's more creative solutions today on the market for that. Believe it or not, you can use qualified IRA money as a lump sum that goes into a solution for long term care. And if you never need it, that's always been an objection over years for people, as I might fund this and never need it, and I've wasted all the money. Well, statistics are pretty high that one of you will need it if you're in a relationship and there's two people in the home, the probability is high that one of you are going to need it. But if you did have this solution and neither one of you needed it, it would pass as a death benefit. Keep that in mind. Ira funds that you would fund for this solution would pass tax free to your beneficiary. So that's an interesting solution and certainly one that if that is kind of new to you, stay tuned and get a hold of us for that. But I'm going to let Mitchell finish the next one here and we'll.

Mitchell Keiser:
So something else you didn't really touch on, but with the Medicare and with long term care cost affiliated with that, Dwight didn't really touch on a whole lot how if you guys did have to enter a facility and if you weren't prepared, how quickly that could drain everything that you've ever worked for. I know the average cost in a nursing home that Dwight's mother in law, my my grandmother in law is in is about $10,000 a month. I know I used to work in long term care administration. And it was there was a rehab facility attached to the building and they were paying out of pocket about $15,000 a month. And that was all. A lot of that was private pay. So if that happens to you and you're not prepared for it, what happens to your IRAs? Well, you've got to drain all those down before Medicaid is going to kick in and start helping you. Something just to keep in mind, if you guys do have a lot of money, there are certain places to park your IRA to help shield that from a nursing home. That's kind of all a part of the plan that you should have as you enter retirement. Again, the plan that you had when you were 26 years old is not the plan that you should have when you're 40 years old, 60 years old, 70 years old. Your plan is constantly evolving because we are evolving creatures. So if you guys aren't prepared for that, that's something else just to keep in mind and to maybe look at different places to park your money.

Mitchell Keiser:
And if you don't know where, no, it's not really on the docket for today, but you can reach out to us. We'd be happy to help out. But the next question that I have for you guys is, is this right or wrong? You can use an annuity to fund your Medicare expenses during retirement. That is correct. You can do that. Annuities are often and what we mean by that is people that use an annuity to fund part of their retirement is they will use that and. There a fixed rate. So fixed rates now on those annuities are over 5%, which is higher than I think any bank has had so far. Some of them have even been over 6%. But you can park your money in one of those and it'll just grow at a fixed rate. And that's the bucket of money that you use for an emergency for health care. Most annuities have a feature in them that even if it's in a surrender period and you need to get the money out, you can kind of break through that period and you can access all of the money. So you have principal protected money still growing and you'd have full access to it. So we hear that as a common strategy that people will use, you know, not all of it, but even 25% of their portfolio just kind of have it there as a rainy day for their health care if they need it, it'll always be there for them. So that is definitely a good option for some people.

Dwight Mejan:
Absolutely. Well, Mitchell, we're going to shift gears here again with the listeners here. We're going to talk about folks that might be listening here who are considering tapping into their retirement savings. So, you know, people need money for different reasons or maybe they want to take money out, take a trip. But we want you to consider some important things, first of all. And the first item I want people to be aware of is the taxation on those withdrawals. So your retirement withdrawals will incur income taxes unless they're taken from a Roth IRA or a Roth 401. K account. And keep in mind, if you don't have those accounts and you're thinking of setting those up, of course you have to be above 59.5 so you don't incur a penalty. But we'll get to that here in another segment. I think Mitchell might be talking about that next. But just keep in mind, there is taxation. If it's on pre-tax money and if you have a Roth account, that account has to be open for five years before you pull money out of that account. So the IRS will tax your withdrawal for most people, but somewhere between 10 and 37%, depending on your income tax bracket. And as a result of this, this is why it's necessary to calculate your estimated tax before you make that withdrawal to ensure that you take enough out to pay the debt that you're going to owe on that withdrawal, the taxes. So with the exception is that Roth retirement account where you can withdraw contributions and earnings without paying any income taxes.

Dwight Mejan:
But again, those accounts have to be in force for over five years. So one of the things I know that we do here with our clients when they call and have an out of the ordinary withdrawal because we have you know, our clients are set up on income plans, but if they have a need for a lump sum withdrawal before we give them that withdrawal, one of the things we do is we take them to the tax map. So we have a tax software that we use and we we plug that in and do an estimate based on their other income that they're taking in during the year. And sometimes we'll catch things like higher Medicare premiums and we tell people, Hey, we can do this, but once you take this amount out, here's what your estimated tax is going to be. And also, by the way, this is going to affect your Medicare premiums. So we've actually helped people avoid higher Medicare premiums and other higher brackets. It could jump you from, let's say, the 22% federal bracket, you know, up to the 32% or 30% bracket. So you don't know that sometimes until the pain comes, when you file the tax return and you get the tax return back and realize you got clobbered. So very important before you just start making withdrawals and tapping those retirement savings accounts that you understand the impact of certainly the taxation on those withdrawals. And Mitchell's going to talk about another important area in that as well.

Mitchell Keiser:
Yep. So the the next topic we're going to do on the early withdrawals is the penalties. So what penalties do you exactly incur? So typically the IRS imposes a tax for these withdrawals and this is what it would look like for you guys. So the penalty currently is 10% for withdrawing before you're 59.5. So this is what that would look like. So not only would you pay, let's just say your income bracket was 22%, you would pay that as income tax on top of another 10%. So on that money, you'd be paying 32% on the funds that you're withdrawing. So for those of you that are jumping ahead of me and you're thinking, well, what about a Roth account? So you're right, the Roth account, you do not have to pay income tax, but you do still pay a 10% penalty on the money coming out. So even if it is a Roth, you're still going to have to pay a penalty, a 10% penalty on the money that you got to withdraw. So like Dwight was saying, you want to make sure that you have a rainy day fund. We always recommend that people have 2 to 6 months of living expenses set aside. So that way if push comes to shove, you guys have an emergency that you're not withdrawing that retirement, withdrawing those. Retirement funds because the penalty on it is it's pretty crucial. And just to kind of also put that into perspective, if that was you and you had to withdraw that at 32%, you're you're paying a 32% in taxes. But if you waited just, you know, a couple years until you were retired, you'd probably there's a chance you'd only pay 10% on that money. So you're paying 22% more on whatever it is that you have to withdraw, which is just basically taking your money and throwing it into the garbage. So you don't want to do that?

Dwight Mejan:
No, absolutely not. Well, on the other last thing we want to point out here to our listeners is if you're considering tapping money from that retirement savings that you have set aside, even if you're over 59.5 and you can do it, although you got to look at the future retirement savings that you're going to have, all those saving for retirement is crucial. Studies have shown about 55% of Americans are behind in saving for their retirement and unfortunately, withdrawing money ahead of time. It's only going to compound the problem. The less money in your retirement account, the smaller your returns will be. Right. So making up yours, making making up years of missed wealth accumulation, it can be very challenging, especially the you know, the later you get had an unfortunate meeting this past week with somebody who just due to some life circumstances, had a lot of legal fees, had some unfortunate things happen and they're just really really behind in retirement. But fortunately, they have a job where they're able to pick up a lot of overtime and they have about a 10 to 11, maybe 12 years left to retire. And, you know, my challenge to this individual that came in my office was you need to pick up as much overtime as you can pick up and and, you know, still show some hope, at least for the future for this individual that they'd have. And they have the ability to save 20, $25,000 a year and they'll still get pretty close based on our estimates of having that 80% of their current wages. They're able to have that in retirement. But if you pull that money out, you're just going to affect the future savings. So a more moderate, you know, option is, you know, really stop making retirement contributions and divert money toward your debt.

Dwight Mejan:
You know, some people have debt. This individual had some of that as well. While you won't put more money into your retirement account, what'll happen is you'll leave existing funds intact to continue earning returns. So you've got to kind of balance that whole debt along with, you know, the savings rate that you're having. So interesting. On the debt, I heard the average American has $600 car payment right now. And if you didn't have a car payment, there's a young person listening to this right now. If you could just not drive the new set of wheels, that's hard for a lot of people to have that delayed gratification. But if you can just put that money aside. The statistic I saw was $7 million you'd have if you're coming out of college and you avoid the large car payment, even if it's half of that is correct. And it's 3.5 million. That's a lot of money. So got to manage that debt as well. But before you use retirement savings to pay off debt, come to meet with us. We can analyze your current situation. We'll explain to you the tax consequences of various actions that you might be considering. We're ready to help. We're here to serve you as a second opinion for the listeners of this show. So reach out to us. You can either call (910) 235-0812 or call (828) 278-7814. If you're in the mountain area and we'd love to sit down with you, walk you through answering your questions and also give you our second opinion. So we're going to take another quick break. And when we come back, we're going to talk about seven financial moves to reduce stress and anxiety.

Producer:
Are you interested in protecting your assets from market volatility, rising taxes and economic uncertainty? Then tune in to Retire 360 with Dwight Mejan to learn how you can protect and grow your hard earned money. Retire 360 Sundays at 3:00 pm right here on Talk 97.3 FM 104.1 FM and 990 a m. Wb Protect your hard earned money today at Retire 360. Show.com.

Mitchell Keiser:
Hey folks. And we are back. This is Mitchell Keiser and you guys are listening to the Retire 360 show brought to you by 360 capital Management here in downtown Southern Pines and in downtown banner Elk, north Carolina. We are going to start off here with seven financial moves to reduce stress and anxiety. This is targeted towards those heading into retirement. We want to help you guys develop the tools, the skills and the disciplines in reducing your stress because we want to live like Bobby McFerrin says. And we don't worry, be happy. So number one, we kind of touched on this a little bit earlier, but have an emergency fund in place. Rule of thumb, we recommend having 3 to 6 months of expenses in a combination of either bank deposits or cash. That way you don't need to tap into those retirement savings or go into debt or pick up some outrageous interest rate of a loan. If something were to go wrong, what could go wrong? You could have your Hvac go out, you could need a new roof, you could need a new car, those types of things. And we don't want you folks living in a constant state of fear. We want you to be happy, enjoying your life, enjoying your last working years. Or maybe you're listening to this and he just started working. You don't want to be strapped to payments your whole life and you don't want to live in fear thinking that you're captive to this, your job, thinking that you need to go there, you need to make money, and that's all you're made to do. So make sure that you guys have a safety fund set aside so you're prepared for all of those what ifs, and you can just focus on the things that you want to and not be controlled by the stuff that you owe money to.

Dwight Mejan:
Yeah. Mitchell, I noticed you kind of brushed right over the ten time Grammy winner Bobby McFerrin. Do you even figuring if this young guy knows who Bobby McFerrin is?

Mitchell Keiser:
So I'll be honest with you, I know the song. That is about it.

Dwight Mejan:
All right. Well, that's good that you know the song. That's maybe they'll get that on at the break. They can play a little. Don't worry. Be happy, because that is what it's all about when you get to retirement, right? Don't worry and be happy.

Mitchell Keiser:
That's right. It's the goal anyhow.

Dwight Mejan:
That's right. Well, number two of a seven financial moves to reduce stress and anxiety. Keep track of your net worth is really important. Includes basically monitoring, monitoring your debts, your assets and your income sources. You need to know where you stand to just to bring your whole financial picture into focus. And it's going to help you set realistic goals. You know, we have people come in a lot to our office that, you know, their goals just aren't realistic and they really don't have a good grasp of their net worth even. So very important that you keep that. I know I do that myself on a spreadsheet that I have set up, and I literally will go in there at least on a monthly basis and, you know, and monitor that and change it. But also important, just consider working with a financial advisor and a professional who can help you analyze your current situation. Sometimes just that that second opinion makes a huge, huge difference. Just sometimes getting one idea that you maybe weren't considering or thinking about is going to help you. Another person was in my office this past week and, you know, she hadn't been contributing to a retirement account, a 401. K, and this one had a 6% match. And she had said she had heard somewhere actually a couple of years back to not save through her 401. K plan. And I'm like, well, I disagree with that. I said, You're leaving money on the table from your employer. I said, you need to figure out how much they're going to match and match up to that level of what they're contributing and then fund outside the plan. So you want to get that match because you're working there. Don't say it's free because you're earning it through the work that you're doing, but you're missing that if you don't take advantage of that. So definitely be taking advantage of the match that your employer is giving you for sure.

Mitchell Keiser:
Yep. Another tip here live below your means and own an affordable home. Now we realize that not everybody has the luxury to own a home, but sometimes if you do, if that is an option for you and you can purchase a home, you can save or you can lock into a cost versus having to pay constantly rising rent prices. Rent prices are some of the highest that they've been ever. If you guys were listening to us a couple of weeks ago, we actually talked about different rent prices across the globe. And that makes home ownership look pretty attractive. And you can lock into a fixed rate and interest rates are high now, but, you know, you can still get a home and refinance when they go back down. So no matter if you rent or own housing is more often than not the biggest budget line item for Americans. So choose wisely and keeping your housing costs under control.

Dwight Mejan:
You know, Mitchell, on that note, too, I think a lot of people, you know, during Covid, because money was pretty cheap. I know a lot of people actually bought another house and they don't have the one that they have paid off. So I'm going to bring us into the the fourth one here, which is pay off that house. Yes. Money right now is relatively cheap. If you locked in, maybe not right now, but it was last year before rates started going up or certainly a year and a half ago. But the happiest retirees that we know are the ones with no mortgage payment. And once you've got your forever home, make it a primary goal to pay off that mortgage and get completely out of debt. You know, I did that a while back on my own house and my wife and I love to to give. And it's just kind of great to be in a situation where you don't have that mortgage and you've got some freedom of whatever else you want to do with that money. It's fun. It's fun not having that. And sometimes you don't realize, you know, that you're kind of a slave to the lender, so to speak, until you get out from under that debt. But it's a great thing to be debt free and to feel like you have options. So pay off that house. That's our point.

Mitchell Keiser:
Yep, Money is freedom, so pay off your home. Also, last tip here. I'm sorry, it's not the last tip, but the last tip we have own a safe and affordable vehicle. You don't want to be strapped to payments of your vehicle, nor do you want to buy a vehicle that's so expensive that you can't afford to fix. Or if you know when you need new tires, make sure that's not going to break the bank. If you need new brakes, you know, anything like that, you want to make sure that you're living below your means and not falling victim to the mindset of keeping up with the Joneses. So. Can cost you a lot.

Dwight Mejan:
Absolutely. You've heard me talk about this here. If you've been listening to the show for most of the segment. Establish an income plan that covers your expenses. Very important that you plan ahead. Get started on your retirement income plan. Know what that plan is going to be? I mean, think about it. How would how would you like to know if you've got 10 or 15 years left to work and you know exactly on a worst case scenario and have it be guaranteed? Wouldn't it be great to know what the worst case scenario is of your income that you could have in addition to Social Security? So you've got to know what that income plan is. And there's financial instruments today that we can show you that of an income amount that you would have based on a certain amount of money that you deposit into that product. We can let you know exactly. Worst case scenario, ten years, 12 years, 15 years from now, how much guaranteed income that would have you would have in there. So a financial advisor, a professional, can help you put an income plan in place so you can rest assured that your paychecks and your paychecks will arrive on time during your golden years. So you got one more there, Mitchell.

Mitchell Keiser:
I need some more of those play checks that you were just talking about. Absolutely. All right. So, I mean, at this time, when I say this is the last one, consider life insurance options. So I touch on this a little bit. So I do the life insurance for our company. And I'll tell you, life insurance is something that's suitable for everybody. However, it is different depending on what stage of life that you're in. When you're a young whippersnapper like myself, you might need to get yourself some term insurance. What that basically is, it's the cheapest type of insurance that you can buy and that will last you for a specific period of time. So, for example, you can purchase a 30 year term insurance of $1 million for probably less than $50 a month if you're in your lower 20s. As you get older, obviously that's going to increase, but it's relatively inexpensive to get insurance like that. Why? Because statistically only 2% of those payout because everybody outlives them. But there is those 2% that they do have to pay that money for. And that 2% is what you need to prepare for when you're younger. I know that I did. You know, you got to think being so I'm 26 years old and I think that if something is to happen to me within the next 30 years, what's my wife going to do with our house payment? What about our kids going to school? If they would go to any kind of Christian school or private school or college, what are they going to do? How are they going to fund that? So if outlive that money and don't get anything out of that policy, it's worth it because I outlived it and I didn't put my family in a bind.

Mitchell Keiser:
Now, I know as people are tailing the end of that time frame, so let's just say you're in your 50s and you don't need that anymore. You just paid off your house, your kids made it through school. You guys are heading that last stage of life. Maybe you get another term policy just in case you know your highest income earning years. So that way you set your family off. Well, maybe you just want to get a small ten year term policy that is applicable for some people and I'm all for that. So if something happens to you within a short amount of time, the shorter the term, the shorter the or the less the money's going to be to buy a policy like that. And then as you're in that stage and I'm going to say the stage after that, people will tend to get some kind of either universal life or a whole life policy. And the purpose of those typically tends to be, I don't want to call it a transfer of wealth, but it sort of is. So what you can do with those types of policies is you can fund them so that way your beneficiaries can receive tax free money.

Mitchell Keiser:
So if you are, you do have a lot of money and that's going to pass to another generation. How are they going to pay for all those taxes? Well, you can purchase a big life insurance policy that could help pay for some of those taxes. So that way, you know, they're keeping a bulk of that money. And for those of you that don't know, let's just say you had $1 million and that was passing to a beneficiary, well, your beneficiary is going to have unless it's your spouse, if it's your kids or a relative or something like that. But they would have to pay tax on all that money within ten years. They have ten years to pay it off. But if you want to offset that or give them a boost in your legacy to them, life insurance is a good option. Key to life insurance. You just have to make sure that you have the right one. We would never recommend that somebody is insurance poor or that they spend all of their money paying for all of these policies. That's foolish. We have people come in here often and we help allocate the ones that you do need and the ones that you don't need. So life insurance in its own as a whole. Other financial topic. But that's the that's the skinny on it.

Dwight Mejan:
Well, we just I had a client Mitchell just dealt with this week on that where they had three policies, two of them they're going to dump and one they're going to hang onto. And they made that decision not by us telling them what to do. We ordered what's called in-force illustrations for them, which lets them see the future projection of the policy. And what they saw was cash value in those policies that they had that was deteriorating and they had one really good one. And I suggested that they hang on to that one and they got rid of the other two and they're able to use some of that cash to invest. So we won't tell you what to do, but we will educate you and let you pick. That's that's what we do is we lay out your options. We make them very clear to you and you'll see which is the best option for you when you do that. So for our listeners, thanks for tuning in. I can't believe we're near the end of the show, but I just want to remind everybody on any topic we discuss today, or perhaps there's something on your mind that we didn't get to and you want to speak with us. So for our listeners, we want you to know we'll do a comprehensive consultation at no cost to you, our listeners. There's no obligation to you if it's a fit and we can offer you something to help, you'll determine that. You'll discover how much you're paying and your fees. You'll discover how much you're paying and your fees help you cut some unnecessary costs from your IRA or 401. K. If there's a way to do that, We can also do some Social Security forecasts for you and planning that's complimentary to all of you as a listener. So reach out to us. If you're in low country area, we're at (910) 235-0812. If you're in the mountain area, it's (828) 278-7814. Mitchell you might want to just give them that date one more time and then you can sign us off.

Mitchell Keiser:
Yep. So if you guys want to come check us out and you are in the Sandhills area, we are going to be having a class at Sandhills Community College on Tuesday, June 13th at 11 a.m. and we are going to be teaching on taxes and retirement. So if that's of interest to you, give us a call. Happy to save you a seat.

Producer:
Thanks for listening. To Retire 360. You deserve to work with an experienced and licensed expert who will strategically work to protect and grow your hard earned assets. To schedule your free no obligation consultation with Dwight, visit Retire360show.com or pick up the phone and call (910) 235-0812. That's (910) 235-0812. Investment Advisory Services offered through Brookstone Capital Management, LLC, BCM A registered investment Advisor. Bcm and 360 Capital Management are independent of each other. Insurance products and services are not offered. For the weekend, but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

Producer:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.

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